Trouble in Paradise Wall Street Journal. These deals are Europe’s analogues to the Jefferson County sewer financing. Why do municipalities allow themselves to be talked into complicated deals with hidden risks to save (probably) 50 basis points?

Tabloid’s Pursuit of Missing Girl Led to Its Own Demise Wall Street Journal. This is what you get when the Journal has to report on its parent. The story isn’t terrible as far as it goes, but it is framed incredibly narrowly and (amusingly) underplays the public’s reaction to the Miller Dowler story and the other legs of the scandal.

Bond markets signal ‘Japanese’ slump for US and Europe Ambrose Evans-Pritchard, Telegraph. Ahem, yours truly made the deflation call as soon as it was clear the US would be cutting the Federal deficit. Deflationary policies were already in place in the Eurozone, they are also operative at the state level and will now be compounded by Federal policy. But this article has more grim tales re Eurobank liquidity. The dollar funding gap is back to $1 trillion, which if I recall correctly is about where it was on the eve of the crisis (I though I had read reassurances that things were safer now because the dollar funding gap was down to $500 billion. So much for that sighting).

“Why do municipalities allow themselves to be talked into complicated deals with hidden risks to save (probably) 50 basis points?” Because every penny saved on loan interest is a penny available for buying votes.

Oh, please. They’re not after votes. Votes are a means to an end. It’s money they’re after. Well, money is a means to an end. It’s power, or the illusion of control over their lives, that they’re after. That illusion is so highly prized. The illusion that we can control our surroundings. The illusion that we can control the consequences of our actions. The illusion that our control can extend past our death, past our mortality.

They do these deals for kickbacks more than for votes, and if the money is better in the private sector than the kickbacks the public sector can gin up, then they’ll junk their governorship or their congressional seat to sit on a news show, or become a lobbyist or whatever else the market is paying top dollar for.

These people are agents, and it is the rare agent that is actually looking out for the principal. That’s why the principal has to stay vigilant about the agent.

You think we can do without agents? You are delusional. That’s not reality. There will always be agents. Collective action is inevitable; you will be destroyed by it if you don’t join one side or the other. Sorry, standing in front of a tank is suicide, heroic illusions aside.

The only thing we can do is be vigilant and try our best to ensure that the agents are doing what they are hired to do. This isn’t rocket science.

“Why do municipalities allow themselves to be talked into complicated deals with hidden risks to save (probably) 50 basis points?” Because every penny saved on loan interest is a penny available for buying votes.

Re: “Trouble in Paradise Wall Street Journal. These deals are Europe’s analogues to the Jefferson County sewer financing. Why do municipalities allow themselves to be talked into complicated deals with hidden risks to save (probably) 50 basis points?”

There was a decent documentary on dutch TV about Italian munis (including the city of Milan) doing similar things (I think they were taking on CDS risk or something; it was broadcast more than a year ago, but it had interviews with Reggie Middleton (Boombustblog) and Matt Taibbi for some general background; I suspect parts can be found on youtube). The people doing it were in over their heads, anyway — fooled by the sales pitches the banks had made.

“It was the kind of news event that fell squarely in the tabloid’s sweet spot. Just two years earlier, the Sunday tabloid had led a campaign that ultimately produced new legislation in the U.K. to protect children against convicted pedophiles.”

This campaign was soundly condemned for leading to vigilante attacks on innocents.

And all the references to News cooperation. Please. Up until Weeting, News was in total denial and lockdown.

From July 11: “Key members of the family that controlled the Wall Street Journal say they would not have agreed to sell the prestigious daily to Rupert Murdoch if they had been aware of News International‘s conduct in the phone-hacking scandal at the time of the deal, reports Richard Tofel of ProPublica.”

How could they NOT see the sale to Murdoch as the end of any credibility their family enterprise had built over the years?

The battle over Greece was political. So is this one. The Europeans do not want to pay off the risk-taking bond holders. They’d rather give them all haircuts. There is good reason behind their attitude. If they print up the Euros (If they decided they could do this) to pay of the bondholders all of Europe is on the hook for retiring all those notes. But right now Europe does not offer itself up as this kind of tax base. Regardless, in order to soak all the Euros back up the Europeans will have to give up some of their social benefits. Because their tax money will have a higher priority, that of paying down the bondholders. Selling bonds that must be repaid by social austerity or some other financialization of society should be outlawed in all countries of the world. Such bonds are unconscionable to begin with. So if this brings down Goldman Sachs and dominoes off to all corners of American, Chinese and Saudi banking it could make the point. They can always use their credit default swap contracts as toilet paper.

If two “states” (or is it “nations”, “countries”, or even “ethnic groups” or ‘religious groups” – whichever, it doesn’t matter to the following thought anyhow) use the exact same currency for all of their (respective?) business, which is REALLY the sovereign?

Unlike Argentines and USians, who do not share a common currency, European blood – in the form of the Euro – flows through the veins of both Germans and Greeks: cutting a vein or artery would harm them both.

The Euro is the child of the world wars of the 20th century: and I for one hope that it gets stronger with time.
Let the moneychangers squeal!

But I’m not sure how I feel about that 1970s haircut. He looks like one of the Bee-Gees, but the grey is a little alarming. I think he could easily dye it sandy blonde and he’d look pretty cool with a surf shirt on.

Trouble in Paradise Wall Street Journal. These deals are Europe’s analogues to the Jefferson County sewer financing. Why do municipalities allow themselves to be talked into complicated deals with hidden risks to save (probably) 50 basis points?

Goldman shows them how. No? Its the finance specialists who have the knowledge resources to stealth gauge public acceptance and offer bribes and favors.

And, BTW, the bigger the disparities between middle class aspirations and the rich, the more civil servants are to corruption; favors -untraceable favors, promotions, public office, school admissions -you name it, the Goldman Sachs of the world have thought of it.

And then there are the threats. My own experience as an Aspen property owner when I went public with my objection to the terms of a municipal offer was that they threatened to turn the parking on the set back at the front of my house into a public parking lot.

Both Ambrose E-P and Yves Smith often speak of ‘deflation.’ But there is no deflation. In the most recent CPI report, CPI-U was up 3.6% year-on-year — same as last month. Not only is there no deflation, even disinflation is not apparent yet.

Bond wallah Michael Ashton expounds further on the theme:

Aside from the kneejerk reaction that we have all been taught to have, that low growth leads to low inflation (despite the number of counter-examples that are ‘inconvenient truths’ to that theory), the current inflation data continues to disappoint on the upside.

CPI came in higher-than-expected on headline, and core recorded a “high” 0.2% to push the year-on-year rate to a (rounded up) 1.8%. Two-thirds of CPI is accelerating: Food & Beverages, Housing, Apparel, and Medical Care showed faster year-on-year growth than they did the prior month. 21% is decelerating: Other Goods & Services and Transportation (although Transportation fell to 11.98% from 12.58%, so it’s decelerating but from a high level). The balance, Recreation and Education/Communication, is neither accelerating nor decelerating. Core inflation, ex-Shelter, rose to 2.02% and is on track to be at 3% by the end of the year.

M2 was up another $43 billion last week, raising the 13-week annualized rate of change to 22.9%. That is actually higher than it was in late 2008 (by a smidge). The 26-week annualized growth rate, at 14.33%, also exceeded the 2008 equivalent. The 52-week change, still puttering along at a mere 10.179%, is still a bit shy of the level it reached in the credit crunch. But we also don’t even have a crunch yet.

Inflation [hedging] is as cheap as it has been in a while because the people who believe that growth causes inflation (you know, like the inflation we have now: clearly caused by the run-away growth we are experiencing!) like to sell commodities and inflation-linked bonds when growth surprises on the downside. Look for opportunities to buy inflation. TIPS are getting cheaper, at least relative to nominal bonds!

Unlike in 2009, when the year-on-year change in CPI briefly dipped negative, there isn’t the slightest chance of a repeat in 2012, even if a bone-crunching recession should unfold.

The geniuses of J-hole [the Fedsters’ summer retreat] habitually forget that monetary policy works with a lag of 18 months or so. Stock prices began rising on the mere announcement of QE2, and collapsed when it ended. But that misbegotten liquidity is still sloshing around out there. Goods prices likely will respond to it on a more leisurely and extended schedule.

“These deals are Europe’s analogues to the Jefferson County sewer financing. Why do municipalities allow themselves to be talked into complicated deals with hidden risks to save (probably) 50 basis points? ”

surely Yves you’ve seen the reason first hand—-Mr. Big shows up to Stillwater USA, plucks down his Amex and butters up Mrssrs. Bored with Family and Monotonous Life with some scotch, steaks and good ole boy/locker room talk.

Mr. Big has a new BFF and country mice just greenlit a contract that they literally don’t understand but smile and nod at.

It’s the updated version of the “Music Man” or its truncated homage, “Marge and the Monorail.”

“(Reuters) – Oil trading data that exposed the extensive positions speculators held in the run-up to record high prices in 2008 were intentionally leaked by a U.S. senator, sparking broader concern about industry confidentiality as Congress moves on Wall Street reform. …”

A key message contained in the book “The School for Gods” whose author is Elio D’Anna, Founder and Dean of the European School of Economics, define the psychological and philosophical framework around which ESE’s Visionary Leadership Foundation Program is built: “If you believe in an external world, then make use of it. Let all the experiences, events and circumstances fall in a place within yourself where you can filter the most useful and eliminate what is useless. This is the place where all your inner rubbish can be transformed in energy and brand new life. But remember! The outer world is only a faded shadow of your inner space, a pale manifestation of your inner responsibility.”

Is economics really a form of religion in disguise? This press release seems to acknowledge that quite proudly. NEW AGE Economics is finally here…. “The Secret” is out.

Bond markets signal ‘Japanese’ slump for US and Europe Ambrose Evans-Pritchard, Telegraph. Ahem, yours truly made the deflation call as soon as it was clear the US would be cutting the Federal deficit.

Alternatively, yields could be indicating a truly massive bubble in Treasury paper.

Who in their right mind lends to a country that is running a tab of $100bn/month, at any price? Who does that at 2% for ten years or 3.5% over thirty? Obviously nobody who expects to get their money back.

Thank you, Central Bankers of the world, for subsidizing American taxpayers. Please, Mr. US Treasury, start issuing as many 30, 50, and 100yr notes as possible (preferably zero coupon) and retire the short end of the curve.

The SEC is suing a regional brokerage firm, Stifel Financial, for allegedly defrauding five Wisconsin school districts through a complicated derivatives deal. The brokerage firm, in turn, is suing the Royal Bank of Canada.

Oil trading data that exposed the extensive positions speculators held in the run-up to record high prices in 2008 were intentionally leaked by a U.S. senator, sparking broader concern about industry confidentiality as Congress moves on Wall Street reform.

Senator Bernie Sanders, a staunch critic of oil speculators, leaked the information to a major newspaper in a move that has unsettled both regulators and Wall Street alike.

In a June 16 e-mail reviewed by Reuters, a senior policy adviser to Sanders discusses how his office received private data with the names and positions of traders and forwarded it exclusively to a Wall Street Journal reporter.

The e-mail, which also attaches two files with the data, was sent to Public Citizen’s Tyson Slocum asking him to review it and speak with the newspaper about his observations.

In a statement from Sanders provided to Reuters, Sanders said he felt the data needed to be publicly aired.

“The CFTC has kept this information hidden from the American public for nearly three years,” he said. “This is an outrage. The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today.”

The leaked information has sparked concern at the Commodity Futures Trading Commission, which is legally prohibited from releasing confidential information that identifies trader positions and identities.

The leak also raises broader questions as U.S. regulators gear up to collect massive new amounts of private data from market players on everything from swaps and hedge funds to blueprints for how large financial firms can be liquidated. The breach of data could make Wall Street less reluctant to hand over sensitive information if they fear it is not appropriately safeguarded.

“This type of incident will have a chilling effect on derivatives trading in the U.S. because market participants will be reluctant to take the risk that their positions will be exposed to the public-and their competitors,” John Damgard, president of the Futures Industry Association, said in a statement sent to Reuters.

Republicans have already raised concerns in recent hearings about the Treasury’s new Office of Financial Research created by Dodd-Frank, and whether its collection of data from hedge funds and banks may constitute a regulatory overreach.

Although the CFTC is barred from releasing confidential data, the law does require the CFTC to hand over such information if a Congressional committee acting within its proper authority requests it. Once it is in the hands of Congress, there is nothing to prevent lawmakers from releasing it publicly.

The leaked data contains long and short positions held by oil traders in 2008, the same year that oil prices spiked to $147 a barrel. Critics at the time accused oil speculators of driving up prices, leading lawmakers to later insert a provision into the Dodd-Frank Wall Street overhaul law compelling the CFTC to place stricter limits on how many commodity contracts any one trader can control.

Among the kinds of traders accused of excessive speculation included passive long investors such as pension funds, which often seek exposure to commodities markets indirectly by going through an intermediary swap dealer such as such as Goldman Sachs and Morgan Stanley.

The data that was leaked to the Wall Street Journal was compiled by the CFTC in 2008 during a “special call” in which the agency sought crude oil position data from swap dealers so they could piece together market activity occurring both on and off the exchange, people familiar with the matter said.

The CFTC first became aware of the breach of the data after a staffer from Sanders’ office sent the agency an e-mail with the information and asked the CFTC’s chief economist to discuss it more.

The agency began exploring internally whether or not any staffers were responsible for the leak, and concluded that no CFTC employees were involved, according to people familiar with the matter.

It is unclear exactly how Sanders acquired the private information, and a spokesman declined to say.

But people familiar with the matter say the data later obtained by Sanders was first formally requested by the U.S. House Energy Committee. From there it somehow migrated over to the U.S. Senate.

Yves: Here’s a nice article on the rise and fall of Bill Browder, CEO of Hermitage Capital, which also nicely explains how his firm worked in Russia at realizing those greatly profitable deals that gave him 1500%/year profits.
Browder has gotten Congress to pass something called the “Sergei Magnitsky Rule of Law Accountability Act”, which, among other things, will bar entry to a number of people, including all of their spouses and children, to the US and other countries who take this act seriously. Magnitsky was an accountant who worked for Browder, who was at the time of his death imprisoned for tax evasion-related issues that Hermitage Capital was in. (Hermitage apparently filed its profits under the 5% tax for nationals rule, in stead of under the 35% tax for foreigners.) So Browder lost right of entry into Russia, and Hermitage sort of collapsed. And now Browder is pissed.